Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 30169
Owner/Managers’ External Financing Used and Preference towards Islamic Banking

Authors: Khalid Hassan Abdesamed, Kalsom Abd Wahab

Abstract:

Economic development and growth are significantly linked to the consistent and sustainable sector of small and medium enterprises (SMEs). Banks are the frontrunners in financing and advising SMEs. The main objective of the study is to assess the tendency of SMEs to use the Islamic bank. Model was developed using quantitative method with a hypothetical-deductive testing approach. Model (N = 364) used primary data on the tendency of SMEs to use Islamic banks gathered from questionnaire. It is found by Mann-Whitney test that the tendency to use Islamic bank varies between those firms which consider formal financing with the ones relying on informal financing with the latter tends more to use Islamic bank. This study can serve academic researchers, policy makers, and developing countries as a model of SMEs’ desirability to Islamic banking.

Keywords: Formal financing, informal financing, Islamic bank, SMEs.

Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1109978

Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 1047

References:


[1] Zhenyu, Wu. Jess H. Chua & James J. Chrisman. 2007. “Effects of Family Ownership and Management on Small Business Equity Financing”. Journal of Business Venturing. Vol. 22. pp. 875-895.
[2] Boohene, Rosemond, Alison S. & Bernice K. 2008. “Gender, Personal Values, Strategies and Small Business Performance a Ghanaian Case Study”. Equal Opportunities International. Vol. 27. pp. 237-257.
[3] Kamel, Mariam R.2012, (October 31). “SMEs in Libya: Promises and Challenges” Libya Business TV. Retrieved from http://libyabusiness.tv /video/smes-in-libya-promises-and-challenges-1#sthash.HozPv2lz.Fu WjUHlj.dpuf. Online Avalible 10 October 2013.
[4] Gallardo, J.1997. “Leasing to Support Micro and Small Enterprises Financial” Sector Development Department, the World Bank.
[5] AL. Wurfali, Toria .A. H.10 2006. “Small and Medium Enterprises in Libya: Present and Hoping”. Workingpaper17, 18 April 2006. Online avalible: 10 November 2009, http://www.kantakji.com/fiqh /Fil es /Ec o nomics/88001.pdf.
[6] Alrubaie, Falah. K. Ali. 2006. “ An Analysis Study to the Problems of Financing Small Projects with Reference to Experience of LIBYAN Development Bank in Darna City” Journal of Munich Persona RePEc Archive. Online available 12 October 2009 http://mpra.ub.unimuenchen. de/8494/.
[7] Futaisi, Mhmoed .A. 2007. “Small and Medium Enterprises under Restructuring of the Libya Economy” Working paper Online available 17 November 2009 .
[8] Salh, Edris Mohammed.2009. “Small and Medium Enterprises (SMEs) in Libya and Its Role in the Development Process” (master thesis) the Arabic Open Academy in Denmark. Online available 6 October 2013. Https.
[9] Kamel, Mariam R.2012, (October31). “SMEs in Libya: Promises and Challenges” Libya Business TV. Retrieved from http://libyabusiness.tv /video/smes-in-libya-promises-and-challenges-1#sthash.HozPv2lz.Fu WjUHlj.dpuf. Online Avalible 10 October 2013.
[10] Badri, Abdul Enwaje .2006. "The Reality of Small and Medium-Sized Projects in Libya," A Symposium on Growth and Development of Small and Medium-Sized Projects in Libya, Center for Economic Research, Benghazi.
[11] Salh, Edris Mohammed. 2009. “Small and Medium Enterprises (SMEs) in Libya and Its Role in the Development Process” (master thesis) the Arabic Open Academy in Denmark. Online available 6 October 2013. Https.
[12] Mews, Constant J. & Ibrahim Abraham. 2007. “Usury and Just Compensation: Religious and Financial Ethics in Historical Perspective”. Journal of Business Ethics. Vol. 72. pp. 1–15. DOI 10.1007/s10551-006-9151-0.
[13] Annual the Report of the National Programmer for Small and Medium Enterprises in Libya. 2010. Unpublished.
[14] Mahrouq, Maher. H. 2003. The Small Firm Lone Guarantee Scheme in Jordan: An Empirical Investigation (PhD Thesis) University Of Newcastle.
[15] Salh, Edris Mohammed.2009. “Small and Medium Enterprises (SMEs) in Libya and Its Role in the Development Process” (master thesis) the Arabic Open Academy in Denmark. Online available 6 October 2013. Https.
[16] Abd Wahab, Kalsom & Abdesamed, Khalid .2012. “Small and Medium Enterprises (SMEs) Financing Practice and Accessing Bank Loan Issues- The Case of Libya”. World Academy of Science, Engineering and Technology .Vol.72.pp.1535-1540.
[17] Metwally, M .1996. “Attitudes of Muslims towards Islamic Banks in a Dual-Banking System”. American Journal of Islamic Finance. Vol. 6. pp.11−17.
[18] Idris, Asma’ Rashidah, Khadijah Nik Muhammad Naziman, Siti Sarah Januri, Fadli Fizari Abu Hassan Asari, Norrini Muhammad, Sabiroh Md Sabri & Kamaruzaman Jusoff. 2011. “Religious Value as the Main Influencing Factor to Customers Patronizing Islamic Bank”. World Applied Sciences Journal (Special Issue on Bolstering Economic Sustainability): 08-13, 2011 ISSN 1818-4952.
[19] Gerrard, P., & Cunningham, J. 1997. “Islamic Banking: A Study in Singapore”. International Journal of Bank Marketing. Vol.15. pp.204- 216.
[20] Ahmad, Norafifah & Haron Sudin .2002. “Perceptions of Malaysian Corporate Customers towards Islamic Banking Products & Services”. International Journal of Islamic Financial Services. Vol. 3. pp.32–45.
[21] Okumus, S. H. 2005. “Interest Free Banking in Turkey: A Study of Customer Satisfaction and Bank Selection Criteria”. Journal of Economic Cooperation. Vol. 26. pp. 51-86.
[22] Metawa, S. & Almossawi, M. 1998. “Banking behaviour of Islamic bank customers: perspectives and Implications”. International Journal of Bank Marketing. Vol. 16, pp.299-315.
[23] Gait, Alsadek H. & Worthington, Andrew. C. 2009. “Libyan Business Firm Attitudes towards Islamic Methods of Finance” Online available 4 October 2011. http://www.griffith.edu.au/ __data/assets/pdf_file/0009/ 146871/2009-10-libyan-business-firm-attitudes-towards-islamicmethods- in-finance.pdf.
[24] Idris, Asma’ Rashidah, Khadijah Nik Muhammad Naziman, Siti Sarah Januri, Fadli Fizari Abu Hassan Asari, Norrini Muhammad, Sabiroh Md Sabri & Kamaruzaman Jusoff.2011. “Religious Value as the Main Influencing Factor to Customers Patronizing Islamic Bank”. World Applied Sciences Journal (Special Issue on Bolstering Economic Sustainability): 08-13, 2011 ISSN 1818-4952.
[25] Abdul Rehman, A. & Masood. O.2012. “Why do Customers Patronize Islamic Banks? A Case Study of Pakistan”. Qualitative Research in Financial Markets. Vol. 4 .pp. 130-141.
[26] Echchabi, Abdelghani & Oladokun Nafiu Olaniyi. 2012. “Malaysian Consumers’ Preferences for Islamic Banking Attributes”. International Journal of Social Economic .Vol. 39 .pp. 859-874.
[27] Alam, Syed Shah. Hawati Janor, Zanariah, Che .Aniza Che Wel & Mst. Nilufar Ahsan. 2012. “Is Religiosity an Important Factor in Influencing the Intention to Undertake Islamic Home Financing in Klang Valley?” World Applied Sciences Journal .Vol.19. pp. 1030-1041.
[28] Sayani, Hameedah & Miniaoui, Hela.2013. “Determinants of Bank Selection in the United Arab Emirates”. International Journal of Bank Marketing. Vol. 31. pp. 206-228.
[29] Haron, S., Ahmad, N., & Planisek, S. 1994. “Bank Patronage Factors of Muslim and Non-Muslim Customers”. International Journal of Bank Marketing. Vol. 12. pp 32-40.
[30] Jalaluddin, A & Metwally M.1999. “Profit/Loss Sharing: An Alternative Method of Financing Small Businesses in Australia”. The Middle East Business and Economic Review. Vol. 11.pp. 8−14.
[31] Naser, K., Jamal, A., & Al-Khatib, K. 1999. “Islamic Banking: A Study of Customer Satisfaction and Preference in Jordan”. International Journal of Bank Marketing. Vol .17, pp.135-50.
[32] Mansour, Walid. Mohamed Ben Abdelhamid G.S.K. Niazi. 2010. “Islamic Banking and Customers’ Preferences: The Case of the UK”. Qualitative Research in Financial Markets Vol. 2.pp. 185-199.
[33] Awan, Hayat M. & Bukhari, K. Shahzad.2011. “Customer’s Criteria for Selecting an Islamic Bank: Evidence from Pakistan”. Journal of Islamic Marketing. Vol. 2. pp. 14-27.
[34] Pepinsky, thomas b. 2012. “Development, Social Change, and Islamic Finance in Contemporary Indonesia”. World Development .Vol. 41. pp. 157–167.
[35] Shahrauddain, Amir, Suhaila Abdul Hamid., Yasmin Hanai M. Safian & Muhamad Muda. 2005. “A Study on Small and Medium Sized Enterprises Perception towards Islamic Banking Products”. Journal of Muamalat and Islamic Finance Research. Vol. 2. No. 1. pp. 1-26.
[36] Haron, S., Ahmad, N., & Planisek, S. 1994. “Bank Patronage Factors of Muslim and Non-Muslim Customers”. International Journal of Bank Marketing. Vol. 12. pp 32-40.
[37] Abdul Rahim, Abdul Rahman. 2007. “Islamic Banking and Finance: between Ideals and Realities”. Journal of Economics and management. Vol. 15. pp. 123-141. By the international Islamic university Malaysia.
[38] Martin, Čihák & Heiko Hesse. 2010. “Islamic Banks and Financial Stability: An Empirical Analysis”. Journal Finance Service Research. Vol. 38 .pp. 95–113.
[39] Schreiner, Martin. 2010. “Islamic Finance”. Journal Economics. Vol. 100. pp.91-93.
[40] Nejullah, Siddiqi Mohammad. 2006. “Islamic Banking and Finance in Theory and Practice; A Survey of State of the Art”. Journal Economic studies. Vol.13.pp.1-48.
[41] Zarrokh, Ehsan. 2010. “Iranian Islamic Banking”. Journal Law Economics. Vol. 29. pp. 177–193.
[42] Usmani, Muhammad Imran Ashraf. 2002. Meezan Banks Guide to Islamic Banking. Darul-Ishaat Karachi.
[43] Mews, Constant J. & Ibrahim Abraham. 2007. “Usury and Just Compensation: Religious and Financial Ethics in Historical Perspective”. Journal of Business Ethics. Vol. 72. pp.1–15. DOI 10.1007/s10551-006-9151-0.
[44] Al- Quran. Surah Al-Rum, verse 39.
[45] Al- Quran. Surah Al-Imran, verses 130-2.
[46] World Bank, 2008. “Finance for all? Policies and Pitfalls in Expanding Access“. World Bank Policy Research Report. Online available 19 December 2009
[47] Mahrouq, Maher. H. 2003. The Small Firm Lone Guarantee Scheme in Jordan: An Empirical Investigation (PhD Thesis) University Of Newcastle.
[48] Salh, Edris Mohammed. 2009. “Small and Medium Enterprises (SMEs) in Libya and Its Role in the Development Process” (master thesis) The Arabic Open Academy in Denmark. Online available 6 October 2013. https.
[49] Abd Wahab, Kalsom & Abdesamed, Khalid. 2012. “Small and Medium Enterprises (SMEs) Financing Practice and Accessing Bank Loan Issues- The case of Libya”. World Academy of science, Engineering and Technology .Vol.72. pp.1535-1540.
[50] Metwally, M .1996. “Attitudes of Muslims towards Islamic Banks in a Dual-Banking System”. American Journal of Islamic Finance. Vol. 6.pp.11−17.
[51] Gerrard, P., & Cunningham, J. 1997. “Islamic Banking: A study in Singapore”. International Journal of Bank Marketing. Vol.15. pp.204- 216.
[52] Idris, Asma’ Rashidah, Khadijah Nik Muhammad Naziman, Siti Sarah Januri, Fadli Fizari Abu Hassan Asari, Norrini Muhammad, Sabiroh Md Sabri & Kamaruzaman Jusoff. 2011. “Religious Value as the Main Influencing Factor to Customers Patronizing Islamic Bank”. World Applied Sciences Journal (Special Issue on Bolstering Economic Sustainability): 08-13, 2011 ISSN 1818-4952.
[53] Metawa, S. & Almossawi, M. 1998. “Banking Behaviour of Islamic Bank Customers: Perspectives and Implications”. International Journal of Bank Marketing. Vol. 16, pp.299-315.
[54] Okumus, S.H. 2005. “Interest Free Banking in Turkey: A Study of Customer Satisfaction and Bank Selection Criteria”. Journal of Economic Cooperation. Vol. 26.pp. 51-86.
[55] Gait, Alsadek H. & Worthington, Andrew. C.2009. “Libyan Business Firm Attitudes towards Islamic Methods of Finance” Online available 4 October 2011. .
[56] Idris, Asma’ Rashidah, Khadijah Nik Muhammad Naziman, Siti Sarah Januri, Fadli Fizari Abu Hassan Asari, Norrini Muhammad, Sabiroh Md Sabri & Kamaruzaman Jusoff.2011. “Religious Value as the Main Influencing Factor to Customers Patronizing Islamic Bank”. World Applied Sciences Journal (Special Issue on Bolstering Economic Sustainability): 08-13, 2011 ISSN 1818-4952.
[57] Abdul Rehman, A. & Masood. O.2012. “Why do Customers Patronize Islamic Banks? A Case Study of Pakistan”. Qualitative Research in Financial Markets. Vol. 4 .pp. 130-141.
[58] Echchabi, Abdelghani & Oladokun Nafiu Olaniyi. 2012. “Malaysian Consumers’ Preferences for Islamic Banking Attributes”. International Journal of Social Economic .Vol. 39 .pp. 859-874.
[59] Alam, Syed Shah. Hawati Janor, Zanariah, Che. Aniza Che Wel & Mst. Nilufar Ahsan. 2012. “Is Religiosity an Important Factor in Influencing the Intention to Undertake Islamic Home Financing in Klang Valley?” World Applied Sciences Journal .Vol.19. pp. 1030-1041.
[60] Sayani, Hameedah & Miniaoui, Hela.2013. “Determinants of Bank Selection in the United Arab Emirates”. International Journal of Bank Marketing. Vol. 31. pp. 206-228.
[61] Haron, S., Ahmad, N., & Planisek, S. 1994. “Bank Patronage Factors of Muslim and non-Muslim customers”. International Journal of Bank Marketing. Vol. 12. pp 32-40.
[62] Naser, K., Jamal, A., & Al-Khatib, K. 1999. “Islamic Banking: A Study of Customer Satisfaction and Preference in Jordan”. International Journal of Bank Marketing. Vol. 17, pp.135-50.
[63] Ahmad, Norafifah & Haron Sudin. 2002. “Perceptions of Malaysian Corporate Customers towards Islamic Banking Products & Services”. International Journal of Islamic Financial Services. Vol.3.pp.32 – 45.
[64] Mansour,Walid. Mohamed Ben Abdelhamid G.S.K. Niazi. 2010. “Islamic Banking and Customers’ Preferences: The Case of the UK”. Qualitative Research in Financial Markets Vol. 2.pp. 185-199
[65] Awan, Hayat M. & Bukhari, K. Shahzad.2011. “Customer’s Criteria for Selecting an Islamic Bank: Evidence from Pakistan”. Journal of Islamic Marketing. Vol. 2. pp. 14-27.
[66] Pepinsky, Thomas b. 2012. “Development, Social Change, and Islamic Finance in Contemporary Indonesia”. World Development .Vol. 41. pp. 157–167.
[67] Ahmad, Norafifah & Haron Sudin .2002. “Perceptions of Malaysian Corporate Customers towards Islamic Banking Products & Services”. International Journal of Islamic Financial Services. Vol. 3, pp.32 – 45.
[68] Shahrauddain, Amir, Suhaila Abdul Hamid., Yasmin Hanai M. Safian & Muhamad Muda. 2005. “A Study on Small and Medium sized Enterprises Perception towards Islamic Banking Products”. Journal of Muamalat and Islamic Finance Research. Vol. 2. No. 1. pp. 1-26.
[69] Shahrauddain, Amir, Suhaila Abdul Hamid., Yasmin Hanai M. Safian & Muhamad Muda. 2005. “A Study on Small and Medium sized Enterprises Perception towards Islamic Banking Products”. Journal of Muamalat and Islamic Finance Research. Vol. 2. No. 1. pp. 1-26.
[70] Awan, Hayat M. & Bukhari, K. Shahzad. 2011. “Customer’s Criteria for Selecting an Islamic Bank: Evidence from Pakistan”. Journal of Islamic Marketing. Vol. 2. pp. 14-27.
[71] Shahrauddain, Amir, Suhaila Abdul Hamid., Yasmin Hanai M. Safian & Muhamad Muda. 2005. “A Study on Small and Medium Sized Enterprises Perception towards Islamic Banking Products”. Journal of Muamalat and Islamic finance research. Vol. 2. No. 1. pp. 1-26.